Microsoft cuts 360 to $199 in throwdown with Sony

Microsoft has finally made it official: Xbox 360 systems will see price cuts …

Ars Technica may have had the story around a month ago, but it's nice to make it official: Microsoft will cut the price on Xbox 360 models by as much as one-third, starting Friday. Expect $50 to be cut from the Pro and Elite models of the hardware (that's about 11 to 14 percent off), and a big $80 off the Arcade model, nearly 33 percent. That carefully plotted discount puts an Xbox system on the market at $50 less than the Nintendo Wii.

Here are the new prices for Microsoft's line of systems:

Arcade (no hard drive) $199

Pro (60GB) $299

Elite (120GB) $399

This also puts two models of the hardware below the price of the PlayStation 3, with the Elite model going for the same amount as the now-ubiquitous $399.99 80GB system—while offering 40GB more in storage. Whether or not that's a selling point is open to debate, as Sony makes it a trivial matter to replace your hard drive with a larger model of any you'd like, a stark contrast to Microsoft's proprietary drives.

"We are thrilled to be the first next-generation console on the market to reach $199, a price that invites everyone to enjoy Xbox 360," said Microsoft SVP Don Mattrick in a statement. "Xbox 360 delivers amazing performance at an extraordinary value with the leading online service and best lineup of games, downloadable movies and TV shows available from a console. The majority of consumers make the decision to buy consoles once the price falls to this mark, making this an important milestone for consumers and the industry."

Mattrick also confirmed that Microsoft's goal is beating out Sony for second place in the US market. "I'm not at a point where I can say we're going to beat Nintendo," Mattrick told Business Week. "We will sell more consoles this generation than Sony."

Microsoft now enjoys the lowest priced current-gen console on the market.

Being the first console this generation to come in under that magical $200 price point is no small feat, and Microsoft is hoping that such a low price will give its sales a kick in the pants, even if less tech-savvy consumers don't realize they'll have to purchase an expensive hard drive to get the most out of their new system. Microsoft is also getting ready to completely revamp the system's user interface this fall with a new, clean look, as well as "avatars" that are the spitting image of Wii's "Mii" characters. These changes should make it easier than ever for casual gamers to get into the system, even if they never use its more advanced features.

Of course, this strategy could backfire. Sony is going in the opposite direction, shining a nice spotlight on its Blu-ray drive and increasingly enticing interaction with their portable system: the PSP. With Microsoft hoping for a more casual experience with gamers, a market that Nintendo seems to have completely locked up, Sony could gain even more momentum by looking like the more "adult" system. Sometimes, especially with consumer electronics, a higher price point can actually help.

The price cuts, while no surprise, certainly make the console wars more interesting. Microsoft has taken a very aggressive pricing stance, and puts a few more talking points under its belt. Whether or not this will jump-start sales is hard to determine, as is the question of whether this move was made out of fear or bravado.